ppp and employee retention credit...ppp forgiveness planning point: now that small business and...
TRANSCRIPT
© 2021
How to Maximize Both Federal Stimulus
Programs for Your Organization
PPP and Employee Retention Credit:
January 28, 2021
© 2021
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© 2021
Agenda
» Employee Retention Credit Eligibility & Claim Process
» FFCRA Credit Extension
» Second Round of PPP Applications & Who Can Apply
» PPP Loan Forgiveness
» Open Q&A
© 2021
Leah Davis, CPA
President | AEM Workforce Solutions
Partner | Abdo, Eick & Meyers
Meet the Presenters
Chris Powers, CPA
Partner | Abdo, Eick & Meyers
Leader of Tax Operations
Tyler Petzel, CPA
Manager | Abdo, Eick & Meyers
Jacob Ouradnik, CPA
Manager | Abdo, Eick & Meyers
© 2021
Employee Retention Credit
» Payroll tax credit based on a percentage of qualified wages & employee expenses
» Eligibility - Economic Hardship Triggers:
» Full or Partial Suspension of Operations due to a Government order, or
» Decline in gross receipts compared to 2019, by quarter
© 2021
Employee Retention Credit ExpansionSignificant changes made by the
Taxpayer Certainty and Disaster Tax Relief Act of 2020
» Now allowed for PPP loan borrowers – previously excluded
» Extends the credit through June 30, 2021, expands eligible wages and
increases the 2021 credit percentage
» Taxpayers allowed to request the credit in advance for 2021
© 2021
2020 Employee
Retention Credit
What’s New?
» ONLY the eligibility criteria changed
» Credit calculation and limits remain
the same
» Economic Hardship Triggers:
» Full or Partial Suspension of Operations
due to a Government order
» Greater than 50% decline in gross
receipts compared to 2019, by quarter
© 2021
2020 Employee Retention Credit
» 50% of qualified expenses up to $10,000 per employee – Annual credit limit
of $5,000/employee
» Qualifying expenses include gross payroll and eligible health care expenses
» Cannot take ERC on any amounts that are used for FFCRA credits or PPP
loan forgiveness
© 2021
Employee Counts Matter
» 100 or less Full-Time Employees*
ALL eligible wages/expenses paid
» Over 100 Full-Time Employees*
ONLY wages/expenses paid while
NOT PERFORMING SERVICES
2020 Employee
Retention Credit
*Full-Time Employee – Any employee who is employed on average at least 30 hours of service per week in any month during 2019. This is calculated by
adding up, per month, all employees averaging 30 or more hours, totaling the 12 months, and dividing by 12 months to calculate the average number of
full-time employees per month in 2019.
Is your Organization Eligible to Receive Valuable Employee Retention Credits for 2020?
YESDid your business or non-profit organization employ 100 or
fewer full-time employees during 2019?
Did you experience EITHER of the following economic
hardships during 2020:
1) a full or partial
suspension of
operations by order of a
governmental authority
due to COVID-19
2) a 50% or greater
decline in gross receipts
for any quarter in 2020,
as compared to the
same calendar quarter
in 2019.
OR
Eligible Wages: Any wages or health coverage costs paid to your employees after March 12,
2020, (EXCLUDING WAGES PAID WITH PPP LOAN PROCEEDS AND FFCRA LEAVE
CREDIT ELIGIBLE WAGES) during the qualifying quarter until the END of the 2020 calendar
quarter in which gross receipts return to 80% or more of gross receipts for the same 2019
quarter.
Credit Opportunity: Up to $10,000 of wages and health coverage expenses per employee
paid in 2020 are eligible for a 50% refundable credit, for a maximum annual per employee
credit of $5,000.
Eligible Wages: Any wages or health coverage costs paid to your employees after March 12, 2020, (EXCLUDING WAGES PAID
WITH PPP LOAN PROCEEDS AND FFCRA LEAVE CREDIT ELIGIBLE WAGES) during the full or partial suspension of operations.
Credit Opportunity: Up to $10,000 of wages and health care expenses per employee paid in 2020 are eligible for a 50%
refundable credit, for a maximum per employee credit of $5,000.
*If yes to both
#1 and #2,
select the
option that
maximizes the
credit
Did you pay any employees wages or qualified health
coverage costs for time that the employee was not
performing services?
STOP HERE. You are not eligible for a 2020 Employee
Retention Credit.1) a full or partial
suspension of operations
by order of a
governmental authority
due to COVID-19
2) a 50% or greater
decline in gross receipts
for any quarter in 2020,
as compared to the same
calendar quarter in 2019.
OR
Eligible Wages: Any wages or health
coverage costs paid to your
employees during the full or
partial suspension of operations, for
time they were not performing
services, after March 12, 2020,
(EXCLUDING WAGES PAID WITH
PPP LOAN PROCEEDS AND FFCRA
LEAVE CREDIT ELIGIBLE WAGES).
Credit Opportunity: Up to $10,000 of
wages and health coverage expenses
per employee paid in 2020 are eligible
for a 50% refundable credit, for a
maximum per employee credit of
$5,000.
Eligible Wages: Any wages or health
coverage costs paid to your
employees, for time they were not
performing services, after March 12,
2020, (EXCLUDING WAGES PAID
WITH PPP LOAN PROCEEDS AND
FFCRA LEAVE CREDIT ELIGIBLE
WAGES) during the calendar quarter
experiencing the 50% or greater
decline in gross receipts and until the
END of the 2020 calendar quarter in
which gross receipts return to 80% or
more of gross receipts for the same
2019 quarter.
Credit Opportunity: Up to $10,000 of
wages and health coverage expenses
per employee paid in 2020 are eligible
for a 50% refundable credit, for a
maximum annual per employee credit
of $5,000.
*If yes to both #1 and #2, select the
option that maximizes the credit
NO
NO
NO
YE
S
YE
S
YE
S
YE
S
YE
S
Did you experience EITHER of the following economic
hardships during 2020:
START HERE
Is your Organization Eligible to Receive Valuable Employee Retention Credits for 2020?
Key Considerations & Reminders
PPP Forgiveness Planning Point: Now that small business and non-profit employers are allowed to have a PPP loan AND qualify for the Employee Retention Credit, it will likely be beneficial or ERC eligible employers to MINIMIZE the qualified payroll expenses and MAXIMIZE other qualified expenses used for the PPP loan forgiveness application. Doing so will
allow employers to save these payroll expenses to be used for the ERC.
Qualified Health Coverage Costs: If they meet either of the economic hardship tests, employers are also eligible to take the Employer Retention Credit for any employer paid health
care/coverage costs that were paid on behalf of the employees during 2020. While the over 100 full-time employee rules about providing service still apply, this is an opportunity for
employers who may have furloughed employees but continued to pay for health care coverage and those who did not use health care costs in their PPP loan forgiveness expenses.
New Employers Not in Business in 2019: There are additional opportunities and guidelines for the Employee Retention Credit for employers who were not in business for all of 2019.
Exclusion of Owner Family Wages: Wages paid to the family of a greater than 50% owner are not eligible for the Employee Retention Credit. The IRS defines family as a child,
grandchild, brother, sister, stepbrother, stepsister, father, mother, grandparents, stepfather, stepmother, niece, nephew, aunt, uncle or any in-laws (mother, father, brother,
sister, daughter, son).
KEY DEFINITIONS:
Full-time Employee: Any employee who is employed on average at least 30 hours of service per week in any month during 2019. This is calculated by adding up, per month, all
employees averaging 30 or more hours, totaling the 12 months, and dividing by 12 months to calculate the average number of full-time employees per month in 2019.
Full or Partial Suspension of Operations: Any full or partial closure of the workplace due to a governmental order (i.e. closure of indoor dining while still allowing take out) or a "more than
nominal" modification of business operations due to a governmental order (i.e. 50% capacity limits in a salon).
OUTSTANDING QUESTIONS:
How do employers claim the Employee Retention Credit for previously filed 2020 payroll quarters?Will employers be allowed to amend completed PPP loan forgiveness applications with the SBA?
Disclaimer: The information contained in these materials are for general guidance on matters of interest only and the applica tion and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and
regulations following the date of publication, there may be delays, omissions or inaccuracies in information contained. This information should not be considered legal, accounting, tax, or other professional advice and, as such, it should not be used as a
substitute for consultation with professional accounting, tax, legal or other competent advisers.
© 2021
2021 Employee Retention Credit
» What’s New?
» Employee counts
» 500 or fewer full-time employees - credit on all eligible wages/expenses paid
» Substantive changes to credit calculation and limits
» Economic Hardship Triggers:
» Full or Partial Suspension of Operations due to a Government order, or
» Greater than 20% decline in gross receipts compared to 2019, by quarter
© 2021
2021 Employee Retention Credit
» Credit Calculation and Limits
» 70% of qualified expenses up to $10,000 per
employee per quarter through June 30, 2021 –
Annual credit limit of $14,000/employee
» No changes to eligible employee expenses
© 2021
» Maximize ERC and PPP forgiveness
» Forgiveness not yet received
» Forgiveness already received
2020Employee Retention
Credit Strategies to
Consider
© 2021
» 2021 Advance ERC Credits
» Delay PPP 2nd draw application
» Maximize non-payroll expenses
for PPP 2nd draw forgiveness
2021Employee Retention
Credit Strategies to
Consider
Is your Organization Eligible to Receive Valuable Employee Retention Credits for 2021?
YES
NO
1) a full or
partial
suspension of
operations by
order of a
governmental
authority due to
COVID-19
2) a 20% or
greater decline
in gross
receipts, as
compared to
the same
calendar
quarter in 2019
OR
Eligible Wages: Any wages or health coverage costs paid to your employees after
January 1, 2021, (EXCLUDING WAGES PAID WITH PPP LOAN PROCEEDS AND
FFCRA LEAVE CREDIT ELIGIBLE WAGES) during the eligible 2021 calendar quarter.
Credit Opportunity: Up to $10,000 of wages and health coverage expenses per
employee, per quarter paid in Q1 and/or Q2 of 2021 are eligible for a 70% refundable
credit, for a maximum 2021 per employee credit of $14,000.
Eligible Wages: Any wages or health coverage costs paid to your employees after December 31, 2020, (EXCLUDING
WAGES PAID WITH PPP LOAN PROCEEDS AND FFCRA LEAVE CREDIT ELIGIBLE WAGES) during the full or partial
suspension of operations.
Credit Opportunity: Up to $10,000 of wages and health coverage expenses per employee, per quarter paid in Q1 and/or Q2
of 2021 are eligible for a 70% refundable credit, for a maximum 2021 per employee credit of $14,000.
*If yes more
than one
hardship,
select the
option that
maximizes the
credit
STOP HERE.
You are not eligible for a 2021 Employee Retention Credit.
NO
YE
S
YE
S
OR
YE
S
3) a 20% or
greater decline in
gross receipts in
the immediately
preceding
calendar quarter,
as compared to
the same calendar
quarter in 2019.
(i.e. Q4 2020 )
Did you experience or plan to experience ANY of the
following economic hardships during Q1 and/or Q2 of
2021:
YE
S
Did your business or non-profit organization employ 500 or
fewer full-time employees during 2019
Did you pay any employees wages or qualified
health coverage costs for time that the employee was
not performing services?
NO
Did you experience or plan to experience ANY of the
following economic hardships during Q1 and/or Q2 of
2021:
1) a full or
partial
suspension of
operations by
order of a
governmental
authority due to
COVID-19
2) a 20% or
greater decline
in gross
receipts, as
compared to
the same
calendar
quarter in 2019
OR
YE
S
OR
YE
S
3) a 20% or
greater decline in
gross receipts in
the immediately
preceding
calendar quarter,
as compared to
the same calendar
quarter in 2019.
(i.e. Q4 2020 )
*If yes to more
than one
hardship,
select the
option that
maximizes the
credit
YE
S
Eligible Wages Any wages or health coverage costs paid to your employees during the full
or partial suspension of operations, for time they were not performing services, after January
1, 2021, (EXCLUDING WAGES PAID WITH PPP LOAN PROCEEDS AND FFCRA LEAVE
CREDIT ELIGIBLE WAGES).
Credit Opportunity: Up to $10,000 of wages and health coverage expenses per employee, per
quarter paid in Q1 and/or Q2 of 2021 are eligible for a 70% refundable credit, for a maximum
2021 per employee credit of $14,000.
Eligible Wages: Any wages or health coverage costs
paid to your employees, for time they were not
performing services, after January 1, 2021,
(EXCLUDING WAGES PAID WITH PPP LOAN
PROCEEDS AND FFCRA LEAVE CREDIT ELIGIBLE
WAGES) during the eligible 2021 calendar quarter.
Credit Opportunity: Up to $10,000 of wages and
health coverage expenses per employee, per quarter
paid in Q1 and/or Q2 of 2021 are eligible for a 70%
refundable credit, for a maximum 2021 per
employee credit of $14,000.
START HERE
Is your Organization Eligible to Receive Valuable Employee Retention Credits for 2021?
Key Considerations & Reminders
PPP Forgiveness Planning Point: Now that small business and non-profit employers are allowed to have a PPP loan AND qualify for the Employee Retention Credit, it will likely be beneficial or ERC eligible
employers to MINIMIZE the qualified payroll expenses and MAXIMIZE other qualified expenses used for the PPP loan forgiveness application. Doing so will allow employers to save these payroll expenses to be
used for the ERC.
Qualified Health Coverage Costs: If they meet either of the economic hardship tests, employers are also eligible to take the Employer Retention Credit for any employer paid health care/coverage costs that
were paid on behalf of the employees during 2020. While the over 100 full-time employee rules about providing service still apply, this is an opportunity for employers who may have furloughed employees but
continued to pay for health care coverage and those who did not use health care costs in their PPP loan forgiveness expenses.
Employee Bonuses and/or Pay Increases: Employers are now eligible to pay employee bonuses or award compensation during Q1 and Q2 of 2021 to increase or maximize the ERC. This was not allowed
under the previous ERC guidelines.
New Employers Not in Business in 2019: There are additional opportunities and guidelines for the Employee Retention Credit for employers who were not in business for all of 2019.
Exclusion of Owner Family Wages: Wages paid to the family of a greater than 50% owner are not eligible for the Employee Retention Credit. The IRS defines fami ly as a child, grandchild, brother, sister,
stepbrother, stepsister, father, mother, grandparents, stepfather, stepmother, niece, nephew, aunt, uncle or any in-laws (mother, father, brother, sister, daughter, son).
Advance Credit Opportunities for 2021: For Q1 and Q2 of 2021, eligible employers may elect to receive an advance credit and payment, at the beginning of the calendar quarter, for any quarter which it
expects to be eligible. This advance credit election cannot exceed 70% of the average quarterly wages paid by the employer in 2019. At the end of the quarter in which the advance credit was claimed, the
employer will be required to reconcile the advance payment with the actual credit allowed and, if applicable, remit payment for any excess advance payment received.
KEY DEFINITIONS:Full-time Employee: Any employee who is employed on average at least 30 hours of service per week in any month during 2019. This is calculated by adding up, per month, all employees averaging 30 or
more hours, totaling the 12 months, and dividing by 12 months to calculate the average number of full-time employees per month in 2019.
Full or Partial Suspension of Operations: Any full or partial closure of the workplace due to a governmental order (i.e. closure of indoor dining while still allowing take out) or a "more than nominal" modification
of business operations due to a governmental order (i.e. 50% capacity limits in a salon).
OUTSTANDING QUESTIONS:How do employers claim the Employee Retention Credit for previously filed 2020 payroll quarters?
Will employers be allowed to amend completed PPP loan forgiveness applications with the SBA?
Disclaimer: The information contained in these materials are for general guidance on matters of interest only and the applica tion and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations
following the date of publication, there may be delays, omissions or inaccuracies in information contained. This information should not be considered legal, accounting, tax, or other professional advice and, as such, it should not be used as a substitute for
consultation with professional accounting, tax, legal or other competent advisers.
© 2021
FFCRA – 2021 Options
» FFCRA employer obligation ended December 31, 2020
» Employer may elect to voluntarily roll forward any unused 2020 employee
balances into 2021 to be used before March 31, 2021 – NOT required
» FFCRA payroll tax credits are allowed through March 31, 2021
» Key Consideration: If employers expect to pay for COVID-19 related leave
anyway, it probably makes sense to participate (some exceptions)
© 2021
Questions about the Employee Retention
Credit or FFCRA?Reach out to me today!
Leah Davis, CPA
President | AEM Workforce Solutions
Partner | Abdo, Eick & Meyers
(507) 524-2347
© 2021
PPP Round 2
» Changes from first round
» Smaller employers (300 or less employees)
» Must have experienced a 25 % decrease in
gross receipts
» Deductible expenses and non-taxable income
» Smaller loan amounts
» Changes for farmers and ranchers
© 2021
PPP Round 2
» Changes from first round continued
» Changes for Accommodation
and Food Services Industry
» 2019 or 2020 payroll costs for
maximum loan amount
» Increase for first round due to
change in guidance
© 2021
PPP Loan Forgiveness
» Additional eligible costs
» Includes worker protection expenditures, supplier costs,
operating expenditures, and property damage
» Change in automatic forgiveness form
» Change in covered period
© 2021
Questions about PPP applications or forgiveness?Reach out to us today!
Chris Powers, CPA
Partner - Business Tax
(507) 304-6828
Tyler Petzel, CPA
Manager - Business Tax
(507) 304-6807
Jacob Ouradnik, CPA
Manager - Business Tax
(507) 304-6808
Beyond the
Numbers
Going
Questions?